JP Morgan Opening New Fund "Behavior"

Citing an unnamed source familiar with the matter, Dow
Jones reports the company is set to register a behavioral
finance fund with the US Securities and Exchange Commission
(SEC).
With the pending registration, JP Morgan will be the first
major investment firm to launch such a fund, according a
Dow Jones report.

Behavioral Pattern

Fund managers who pick stocks on behavioral finance
concepts believe that stock-market moves are tied to the
psychology of investors, who act irrationally but in a
consistent manner. The hope among them is that future
stock-market fluctuations may be partly predicted by
analyzing investors’ behavior.

At its most elementary level, behavioral finance can be
as easy as investing in cheap companies with low
price-to-earnings ratios. The thinking is that investors
tend to ignore cheap stocks just as the stocks are ripe for
a turnaround, just as they tend to flock to expensive
stocks that are set to falter.

Using this approach, a disciple of behavioral finance
might sell a stock just when a company is at its peak of
popularity under the assumption that investors always flock
to the best-performing stocks and drive their prices
unnaturally high.

Desert of Data

Investors who want to check how the theory holds up in
practice will find existing data scant. Value fund managers
often use behavioral finance theories when stock picking,
but it’s hard to know how much the theories contributed to
their performance.

However, those with an instinct for historical
performance will find these current funds that openly trade
on a behavioral finance platform: